U.S. import prices fell for a second straight month in December as the cost of petroleum products tumbled and a strong dollar curbed prices of other goods, leading to the largest annual drop in more than two years.
The report from the Labor Department on Wednesday added to weak producer and consumer prices data, strengthening economists' expectations of a pause in interest rate increases from the Federal Reserve in the near term.
Fed Chairman Jerome Powell said last week that low inflation afforded policymakers "the ability to be patient and watch patiently and carefully" while they monitored economic data and financial markets for risks to growth. The U.S. central bank has forecast two interest rate increases this year.
Import prices declined 1.0 percent last month after a downwardly revised 1.9 percent drop in November. Economists polled by Reuters had forecast import prices decreasing 1.3 percent in December after a previously reported 1.6 percent decline in November.
In the 12 months through December, import prices fell 0.6 percent. That was the biggest annual drop since September 2016.
It was also the first year-on-year decline since October 2016 and followed a 0.5 percent rise in November. Import prices fell 0.6 percent in 2018, the first calendar year drop since 2015, after increasing 3.2 percent in 2017. U.S. financial markets were little moved by the data.
Against the backdrop of low inflation and slowing growth in China and Europe, some economists believe the Fed will not hike interest rates in the first half of 2019. There are signs the U.S. economy slowed at the end of 2018, with consumer and business sentiment surveys weakening sharply in December.